The
system needs credit to cover its profits, that extra-value it gets
out of the market. Along with imperial plunder, credit is
capitalism's lifeblood. The pandemic put a damper on the demand for
credit. People were consuming less, either because some consumption
was no longer on offer, or because of the uncertainty of future
incomes. The slack in borrowing was taken up by governments and
financed by central bank fiat money creations. That money has been
spread around to keep companies going and consumers spending. But the
pandemic is now into its second year and showing no signs of abating,
except in countries where “test, trace and isolate” has been
effective, and where populations have been vaccinated at a fast rate.
A return to the situation prior to 2020 has been promised time and
again, though that seems increasingly unlikely. Even if the spread of
COVID-19 with its present variants is brought under control in
developed countries, it will still be circulating in the rest of the
world and producing mutant variations, some of which will need new
vaccines for previously immunised populations. This foreseeable
outcome will transform the future beyond recognition. Effective
travel bans will result from enforced isolation for all arrivals, and
the general uncertainty will not encourage borrowing. Whole
industries will crumble and capitalism will be starved of profits.
The
pandemic is shaking the already weak foundations of industry,
services and finance, and climate disruption is beginning to affect
the food supply everywhere, not just in drought stricken parts of
Africa. The temperate zones and the Tropics are being subjected to
freak weather conditions that are ravaging crops. Food scarcity will
push up prices and provoke an inflationary spiral, where wages
struggle to keep up with the cost of living, and any gains result in
higher prices. Inflation will make credit and debt more costly, while
past debts will be paid back in devalued currency. With global debt
at around three hundred trillion USD, what will happen if lenders
decide not to renew it and want cash to move their investments
elsewhere, or if they only grant short term loans at usurious rates?
Non-renewals would provoke mass defaults and would crash the system,
whereas usury would push up prices and fuel more inflation. Global
finance has allowed capital accumulation on a gigantic scale. But it
is all based on digital and paper promises of future payments that
have no intrinsic value, and can become valueless overnight. COVID
and climate are the straws that will break the camel's back. And, on
the positive side, it could be the end of profit capitalism's
dominion that has oppressed humanity and plundered the environment
for centuries. Unfortunately, the ideology of profit has been so
pervasive and has become so ingrained that it can pass off as human
nature. To want more for less means accepting that someone else gets
less for more. This is possible when customers and employees become
an abstract mass of faceless individuals, a herd of sheep for
shearing.
Capitalism
evolved out of serfdom and colonial slavery, when the work force
could be beaten and starved into submission. Industrial production
and the fossil fuel revolution generalised wage labour, chronic
malnutrition and extreme absence of hygiene. The bourgeoisie
struggled against monarchy and aristocracy for freedom and equality.
They obtained the freedom to exploit the world, and “equality
before the law that forbids rich and poor alike from sleeping under
bridges, begging on the streets and stealing bred” (Anatole France)
(1). The working class became a strange, dangerous species, kept at a
safe distance by armed force. The 1940s brought death, destruction
and change. Total war stressed the importance of ordinary workers and
soldiers. Their willingness and engagement were essential, and that
could only be obtained by giving them a larger share of wealth and
power, as well as a wider access to the middle-class through
education. Soldiers moved up in the ranks and labourers learned
accountancy, draughtsmanship or whatever, by mail and evening
classes. As the war evolved, turning cold in Europe and warming up
throughout the colonial empires, the opening up of education
accelerated with old universities expanding and new ones being built.
There was even a trickle-down to minorities.
The
drive for education was a drive for technological dominion, the
importance of which had been proven by the nuclear obliteration of
two cities in August 1945. The war machine needed bright minds to
stay ahead of its adversaries, and the larger the numbers going into
the system, the greater the chances of producing the best. However,
the ruling classes have always been wary of educating the masses,
preferring to keep knowledge as a privilege. Even reading skills, not
to mention writing, were restricted to a minimum until the press
barons took control of information and needed a wide readership.
Until the 1950s, higher education remained elitist. The masses did
not need to know more than they needed to know. But, back in the
1930s, the USSR had upgraded education and granted access to its
universities for all social categories, and had all but caught up
with the technological leaders. Higher education for the masses was a
success. It transformed the world at an unprecedented pace, with a
continual flow of new concepts, applications and machines. But
education is a dangerous tool that at some stage teaches pupils to
think for themselves, to reason and to search for knowledge. That can
lead to inventiveness, scientific discoveries and technological
innovations, but it can also provoke a questioning of social
structures and the distribution of wealth and power. In its early
stages, education transmits the rules of grammar, spelling and
arithmetic as absolute. Later, with physics, chemistry, history,
literature and geography, rules are shown to have evolved over time
or to have come from far away. They are conventions, and can be a
barrier to a better understanding of reality. And, in most domains,
they have constantly been transgressed.
Universities
have always been trouble spots and students have often been trouble
makers. By the 1960s, they were so numerous that their protests were
disrupting the social order. Student rebellions peaked in the late
1960s, and were followed by disenchantment. Nothing seemed to change
so other ways of living were experimented, breaking up and dispersing
the movement's unity. Rural communes tried to subsist, most were
short lived, and addictive drugs, mainly opiates and alcohol, took
their toll, but the majority reintegrated the system as best they
could. The psychedelic interlude was quickly wiped off the collective
memory. There were some transformations, the slow road to gender and
racial equality was opened, and colours replaced the drab black and
white of the previous era. But the ruling class, with their profit
capitalism and their war-machines, were back in charge of consenting
societies. Thatcher and Reagan were the able propagandists of that
return to docility.
Woodstock
signed out the old world, with sex, drugs and Rock'n'roll, peace and
love, and some mud for fun. Altamont signed in the new one with
gun-power. The consent to “neo-liberalism”, where everything is
up for grabs and profit alone determines decisions, was not
universal. Armed constraint was till necessary, at home and abroad,
as was a severe penal system. Both tended to grow in size, and
lawmakers were always prompt in funding them and increasing their
prerogatives. As market forces were unable to install any form of
contentment, and as labour was progressively devalued by globalised
production, growing dissatisfaction needed more vigorous controls.
Population control has been described by Orwell, and an essential
part is to restrict the capacity for thought. This includes a media
barrage of futile insignificance and a reduction of vocabulary.
Constant streams of sound and video occupy the senses, and words
disappear or become unintelligible, “War is Peace” (2). McLuhan
argued that a new medium had a hypnotic effect. His word was
“sleep-walking”. The increased precision of video images and
digital sounds had that effect, and TV became reality, inviting all
viewers into its intimacy.
The
consent to market forces blossomed in the last decade of the century,
a cocaine induced euphoria predominated alongside garage bands and
startups, while the masses seemed content with sugar, fats, alcohol
and televised entertainments. The new millennium began with a
hangover. The froth of the previous decade suddenly melted away. The
dot-com bubble burst, apparent wealth was dissolved, and a few
heavyweights picked up the interesting pieces for next to nothing.
The concentration of capital was off to a new start. The following
year, New York and Washington DC experienced their first ever aerial
attacks. The newly installed president, who had mostly played golf up
till then, put on his POTUS flight-jacket and declared a global war
on terror, a sufficiently vague adversary to be potentially hiding
anywhere and everywhere. America the beacon of success, the model of
modernity, turned into America the warmonger, spreading death and
rubble on its devious path. Big Oil was at the helm and intent on
crushing all competition. Iraq, Iran, Libya and Venezuela were its
targets, even Russia would be harassed financially. External war and
internal repression was the declared policy, with total surveillance
of the digital sphere. The wars dragged on at an increasing cost, and
penal servitude grew into a vast, profitable industry.
In
2008, American banks were on the verge of collapse. Lehman Brothers
fell, but the others were saved, “bailed out” by the incoming
administration. The shock-wave battered banks everywhere, and
government interventions became the norm. Private banks were
recapitalised with public money, and nothing was imposed on them in
exchange, other than somewhat higher reserves to secure their
lending. The subprime mortgage crash demonstrated that lending has
limits. But profit capitalism could not accept the evidence. If
mortgages had shown they had boundaries, other domains of debt had
yet to do so. University students and businesses would give a new
boost to borrowing. But, presently, student debts have probably
peaked. Based on high future incomes, their repayments are
increasingly unlikely, and the burden will fall on governments that
have guaranteed them. Companies habitually borrow to finance their
productive investments, but more recently they have been encouraged
to buy back their shares with debt. Considerable numbers of shares
have been taken off the market and scrapped, while the prices and
dividends of the remaining ones have risen proportionally. This
transformation of shares into bonds is motivated by very low interest
rates. Profits pay interest and dividends. If the rate of interest on
bonds is lower than the price-to-earnings ratio of shares, the
transformation leaves a margin of profit that is divided up among the
remaining share holders. It also concentrates ownership. However,
shares are eternal, whereas bonds have a precise term that may be
long or short, at which point they must be paid back or renewed. At
some time in the future, possibly quite soon for the earliest
buybacks, lenders will demand their money back, or may lend again at
a likely higher rate of interest. Companies may sell-back shares to
pay off these bonds, or may renew the bonds at higher rates of
interest. Whether it be more shares on the market or less dividends,
share prices will fall. And those companies unable to do either will
default on their debts, go bankrupt and possibly disappear.
Since
2009 governments have accelerated their borrowing, with a surge over
the last year. These increasing budget deficits and Treasury debts
should have raised interest rates, by the simple effect of supply and
demand. But, in fact, interest rates dropped to historic lows because
central banks were buying all the Treasury bonds they could get on
the market, and some corporate bonds as well, thereby driving up
prices and bringing down rates. Government debts are a constant
upward march, only growth and inflation have contained their
proportions relative to GDP. Over the past decade growth has been
sluggish and official inflation has kept low, though the cost of
living has risen considerably because of new additional necessities.
After 2009, household borrowing slowed down and government borrowing
accelerated. This compensation insured the continued flow of profits.
And with the pandemic, the same method was just multiplied. In
effect, central banks are printing money for governments to borrow
and insure capitalist profits. Like the rest of capitalism, the
process does not have a sustainable future.
Spending
tomorrow's income today makes sense for an investment that will
produce that future income. Though there is the tricky question of
interest that presumes a profit. On the other hand, consuming
tomorrow's income today merely means less consumption tomorrow. This
obvious consequence has been masked in the past by rising wages and
inflation, and by the vast numbers of potential debtors, when each
new debt compensates the incremental repayments of several past
debts. Consumer credit increases consumption up to the point where
borrowing and paying back balance out. This moment of reckoning can
be pushed back by renewing debts instead of paying them back, and
even increasing them to cover interest payments. In the case of
individuals and companies this is the road to default and bankruptcy,
and lenders should be wary of it, though the subprime crash showed a
blatant lack of such awareness. Governments, however, cannot default
and are allowed to increase their debts indefinitely.
Obtained
by getting more value out of the market than it puts in, capital's
profits are paid with public and private consumer debt and imperial
plunder. The main consumers are governments and their countless
employees and, like other consumers, their pay more than they get
and make up the difference with debt. Personal debts are paid back by
the individual or by her/his estate after death. Governments are
eternal, and their debts are perpetual. And though Treasury bonds
have a term, they can be renewed for ever. Over the past year or so,
household borrowing slowed down considerably, as future incomes
became uncertain or stopped altogether. The profit machine would have
screeched to a halt if governments had not borrowed massively in
their stead and distributed the proceeds to everyone. The gap in
private borrowing has been filled by public borrowing. And the idea
seems to be that a post-COVID world will restore the growth in
private borrowing. An idea that will probably not materialise. For a
start, the pandemic, as its name implies, is global. A worldwide
immunity, by contagion or vaccination, will certainly take several
years, and the high rate of mutations could mean that the whole
process of immunisation may have to start all over again. And the
virus is extremely transmissible, which makes its eradication so much
more difficult. COVID will not be going away soon, and during the
various curfews and lockdowns new life habits have been forcibly
experienced. For a majority, the only change was wearing a mask and
the constant fear of catching the bug and contaminating others. For
quite a few, it meant working from home. Depending on circumstances,
that change was pleasant or harassing. But, for all those concerned,
it put an end to the stress of commuting at rush hours by car or
public transport. And “Casual Fridays” were all week. Meanwhile
employers have reduced their office space and may not wish to
increase it again, as it has brought down their rental expenses.
Even
supposing the pandemic is brought under control next year, or the one
after, the past is gone and cannot be retriever. The system of
fuelling profits with debt has run its course, as have carbon dioxide
emissions. Both have already gone too far, and both are part of
expansion and growth. If COVID is just an interlude, pouring vast
sums of public debt into the system might maintain it on its
destructive path a while longer. But the new virus is more than that,
and is shaping up to disrupt the capitalist order for some time to
come. Long enough to expose its exploitation and fracture it
irremediably. After imperial plunder, fossil fuels and debt have been
the fundamental elements of capitalism, and both are close to there
ultimate stages. The premise that a transition from fossil fuels to
renewable electricity will occur some time before the end of the
century is shown up as a fantasy by the numbers. In 2019 global
consumption of methane (24.2%), coal (27%) and oil (33.1%) added up
to 84.3% of all energy consumed. Hydro-electricity (6.4%), produced
by daming rivers, is probably close to its maximum. Nuclear reactors
generated 4.3%, and even at that small fraction are unable to resolve
the safe, long-term storage of their extremely radioactive residues.
Finally, from next to nothing two decades ago, wind, solar and wave
or tide generated energy has grown to 5% of the total (3). For a
replacement, that number would have to be multiplied by over sixteen,
supposing energy consumption does not increase, which contradicts
capitalism's growth priority. So far the growth of “renewable”
energy has just accompanied the general growth of energy consumption
and has only slightly mitigated the growing consumption of fossil
fuels. Renewable energy is like fair trade and responsible finance,
a good conscience for many and healthy profits for a few. The vision
of a carbon free future somewhat similar to today, with the big
motors that drive tractors, trucks, ships and planes converted to
hydrogen or vegetable fuels and the rest plugged in or on batteries,
supposes that the energy mostly drawn from under ground will be
produced above ground. Vast expanses of solar panels and mirrors, and
countless wind turbines whistling on the skylines will be necessary,
as well as the capacity to stock electricity and maintain the supply
at night and when winds are too weak or too strong. Renewable energy
does not have the constance of fossil fuels, nor the ease with which
they can be stored. The transition, if it occurs, will be a bonanza
for the industries concerned, but it will be painful and costly for
the rest of society. Land will be occupied that had been previously
been lived on, or cultivated, or been left more or less to fend for
itself. High-voltage cables will replace pipelines, and gas stations
will have charging posts instead of pumps. Households will need more
wattage to charge their growing numbers of batteries. As for
industry, some sectors cannot survive without carbon emissions, but
they could be “carbon neutral”. It has been estimated that an
acre of solar panels produces on average a million watt-hours per
day, and their efficiency is still growing. Supposing some daytime
production is stored for nighttime consumption, it divides down to
about 40 KW per hour. This would probably supply twenty households in
the developed nations at present levels of demand, more elsewhere and
certainly less if cars and heating are all electric. And that is just
domestic usage, and does not include public lighting and the
production, distribution and sale of goods and services. All
together, an acre of panels may supply the energy consumption of
about ten households. Some of these huge surfaces could be found by
installing panels on all roofs and walls that are conveniently
oriented. But the conversion to low or zero carbon emissions is such
a prodigious enterprise that it will only be realised if energy
consumption is considerably reduced. And it may be too late anyway.
All
climate scientists have expressed their surprise at how fast
temperatures are rising in the Arctic regions, three times the global
average of one degree Celsius. This does not seem to have been
foreseen by their computer models. The Arctic ice cap is not
floating. It rests on the seabed, which means that melting ice
increases sea levels the same as if it was on land. And all the
melting permafrost is doing its share. Antarctica, where most of the
ice is deposited, is warming at a more reasonable rate, probably
because greenhouse gas emissions are concentrated in the Northern
Hemisphere, and the atmospheric transfers between North and South are
slow. Melting ice in the Arctic may have a small effect on ocean
levels, but the increased temperatures are disrupting the northern
jet stream and provoking unpredictable, unseasonal meteorological
abnormalities. And as most of the world's population lives in the
northern hemisphere, the polluters will face the brunt of the
consequences. This is already happening and is not some
end-of-the-century scenario. But it may just be the effect of the
carbon dioxide emitted twenty or thirty years ago, as some
researchers consider that to be the delay between its presence in the
atmosphere and its effect on climate. While the world discusses
reducing emissions, the amounts already emitted may be enough to push
global temperatures past the critical point of plus 3°C. And future
reductions cannot change that fatality.
Humanity
has gone beyond the limits of pollution and debt, with the USA
leading the way and enforcing compliance to wealth and power. The
ideology of capital accumulation in private hands is backed by
irrepressible military might, able to destroy most life on Earth in a
nuclear winter, and forcing friends and foes to arm themselves,
albeit on a much more modest scale. That ideology has been so
successful in dominating the planet that it cannot conceive an
alternative. If profit is the only determining factor, then all other
considerations are swept aside as irrelevant. The primacy of profit
has justified the worst atrocities inflicted on humans, animals and
plants, and finally on the whole ecosystem that makes life possible
in its multiple forms and total interactions. And all that extra
value that has not been paid for needs debt to fund a “solvent”
demand. However, profit is not capital's final objective. It is just
the means of accumulation, of ever more. So an alternative to debt
exists. Foreign trade or plunder can transform consumption into
investment. The ultimate consumption that are guns and ammunition can
be transformed into land ownership, the ultimate investment. And more
prosaic consumption such as cars and refrigerators may be exchanged
for valuable minerals. These transformations have been used for
capitalist accumulation in the distant and not so distant past, and
still continue. But foreign markets have limits to what they are able
to transform, and homeland consumer credit is needed to absorb the
growing supply of unpaid value. Capital accumulation in private hands
has determined today's world, a desecrated planet and debt slavery.
This has been its unspoken intention from the outset, but it was
conveniently hidden by ideological and geopolitical masquerades,
nationalist demagoguery and supremacist fantasies. And even now that
the monstrosity is there for all to see, other circumstances are made
to bare the blame. Other things that can seem disconnected from
capital accumulation, such as greenhouse gas emissions, the pollution
of rivers and oceans, immigrations and now COVID-19. They are blamed
on the faults of humanity in general, not on the optimisation of
profits.
Capital
has nowhere left to go without infringing on other capital. Mergers
and acquisitions allow the big to swallow the small and get even
bigger, but they do not increase the general amount of capital. Vast
wealth is moving around the planet in search of profit and is finding
it increasingly difficult to achieve that objective. A similar
blockage occurred over a century ago when colonial empires had
finished dividing up the planet. Colonial plunder was not evenly
distributed and favoured some national capitalisms far more than
others. Tensions led to war, and by 1945 the industrial nations were
largely reduced to rubble and ruins with the exception of the USA.
America had shown the awesome power of its military industry in a
total war that pitted nations against nations. The existence of
nuclear weapons, fission then fusion, made that experience morally
difficult to repeat. The Cold War that followed seemed to oppose
communism and capitalism, an ideological struggle between freedom and
servitude, between relative equality and the absolute power of
wealth, but it was mainly about control of resources and markets. Who
governed and how they governed was far less important than the
insurance given to private investments. And military dictators were
more easily convinced than democratic assemblies. Capital
accumulation and profits grew and grew, just like the debts that
realised their value. A century ago global tensions concerned the
realised profits of colonial plunder. Today's tensions still involve
plunder, but they are largely focused on debt as the major source of
profits and a domain for investments. Vast sums are washing round the
system, realising the profits of production but producing nothing
themselves. A gigantic mass of wealth that will soon subside as it
has no destination. More of the same to infinity is not a workable
model.
1.
“La majestueuse égalité des lois
interdit aux riches comme aux pauvres de
coucher sous les ponts, de mendier dans la rue et de voler du pain”.
Le Lys Rouge, 1894
2.
Victor Klemperer's book, LTI, is a fascinating factual account of
linguistic manipulation during the Nazi Third Reich.
3.
https://en.wikipedia.org/wiki/World_energy_consumption
